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Original Research
PAGE NO.
34-38
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SUBMITED
24 March 2025
ACCEPTED
20 April 2025
PUBLISHED
30 May 2025
VOLUME
Vol.05 Issue05 2025
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Priority Directions in The
Management of Public
Debt in The Republic Of
Uzbekistan
Juraev Pakhlavonjon Usarovich
independent researcher, Tashkent State University of Economics,
Uzbekistan
Abstract:
This article discusses the significance of public
debt in the development of the national economy and
social infrastructure. It outlines the economic essence of
public debt and presents scholarly conclusions by
economists regarding the causes of its emergence. The
article explores the advisory guidelines provided by
international financial organizations concerning internal
and external debt norms. Analytical data on
Uzbekistan’s external and internal debt are provided.
Furthermore, proposals and recommendations on the
effective management of debt are formulated.
Keywords:
External debt, international standards,
income, export, gross revenue, added value, gross
domestic product, domestic debt, securities.
Introduction:
The management of a state's debt
obligations is one of the elements of macroeconomic
policy. Effective use of debt can serve as a powerful
driver of economic growth. A stable position in the
international capital market and timely fulfillment of
debt obligations enhance a country's international
reputation and attract additional investment on more
favorable terms. In addition, it increases trust in the
national currency and strengthens foreign trade
relations. On the other hand, a crisis in external debt can
not only negatively impact the economy but may also
carry political implications. Indeed, the need for
borrowing naturally arises depending on a country’s
economic condition. The demand for borrowing may
emerge not only during economic crises or stagnation
but also for implementing certain strategically
important projects or programs. For example, special
attention should be paid to developing social
infrastructure, reducing poverty through employment,
supporting the growth of small and medium-sized
enterprises, and strengthening defense capabilities.
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Journal of Management and Economics
In the development of Uzbekistan’s economy, public
debt, as well as effective economic governance, play an
important role. In Presidential Decree No. PF-60 issued
on January 28, 2022, “On the Development Stra
tegy of
New Uzbekistan for 2022
–2026,” [1] the third priority
direction, “Accelerated development of the national
economy and ensuring high growth rates,” includes
specific measures for economic development and
effective public debt management.
It is important to note that in recent years, the
increasing volume of public debt has sparked a variety
of opinions and approaches among the academic
community and the general public. Therefore, it is
becoming crucial to establish debt limit thresholds,
assess the impact of public debt on macroeconomic
stability, and conduct research to improve the
scientific aspects of debt management.
LITERATURE REVIEW
High levels of public debt raise concerns about debt
sustainability. Rising interest rates increase pressure
on public finances due to the cost of debt servicing.
Economic literature highlights other concerns related
to public indebtedness. While public spending funded
by debt may stimulate short-term economic activity,
persistently high and growing debt levels can
negatively affect long-term economic growth [2]. As
the volume of public debt grows, the government’s
demand for capital in financial markets rises, creating
competition with the private sector. In such cases,
public debt may crowd out private investment in two
ways: first, by substituting real capital in investment
portfolios; and second, by raising the cost of borrowing
for the private sector. When public debt reaches high
levels, investors demand higher returns as
compensation for increased risk, which raises the yield
on sovereign bonds [3].
From an economic perspective, public debt is one of
the tools of fiscal policy used for the following
purposes: covering budget deficits, stimulating
economic activity, supporting monetary policy, and
financing specific strategic projects. Through public
debt, the government enhances investment capacity
and quickly mobilizes resources for the development
of key economic sectors. In this way, it is viewed as a
tool that accelerates capital accumulation [4].
Public debt, as an integral feature of a market
economy, directly or indirectly influences the state
budget, inflation, foreign investment, exchange rates,
and other indicators. Debt management mechanisms
are used to regulate monetary circulation, determine
the level of business activity, and balance public
revenues, expenditures, and budget deficits [5]. The
expansion of cross-border financial flows has
contributed to the rapid development of the debt
capital market and the formation of stable credit-debt
relations among countries. The increase in external
public debt is largely linked to globalization processes,
which have accelerated the development of the
international credit system. Globalization facilitates
investment processes and generates new financial flows
that rapidly move between countries, fundamentally
reshaping the structure of credit-debt relations [6].
It is worth noting that in recent years, many studies on
public debt management have been conducted by
economists in our country, which has had a positive
impact on the development of this field.
The impact of public debt on the economy can be both
positive and negative. When public debt levels are low
or the state budget shows a surplus, there is usually no
demand for government securities in the financial
market. As a result, the most liquid instruments of the
financial market do not emerge, leaving business
entities dependent solely on the banking system for
access to financial resources. Furthermore, an increase
in government expenditures can lead to a trade balance
deficit [7]. In the context of engaging in international
financial and economic relations and organizing
integration processes, public debt is considered one of
the key instruments for economic development. Most
foreign countries, regardless of their level of economic
development, carry both internal and external public
debt. Public debt is a dynamic indicator that may
increase or decrease over time. A reduction in public
debt also reduces the debt burden and saves resources
that would otherwise be spent on debt servicing [8]. In
managing public debt, it is important to consider its
types and operate within established economic criteria.
Therefore, clarifying administrative responsibilities and
establishing economic benchmarks in public debt
management are of great importance [9].
Of course, as the definitions by economists mentioned
above show, public debt not only contributes to national
economic development but also serves as a key source
for financing urgent expenditures in the present time. In
managing public debt, it is essential to pay special
attention to the standards recommended by
international organizations and institutions. Exceeding
the established limits of public debt can lead to
economic problems for the state in the future.
RESEARCH METHODOLOGY
During the course of this scientific study, methods such
as synthesis, categorization, abstract-logical reasoning,
forecasting, logical and structural analysis, as well as
mutual and comparative analysis, were effectively
utilized.
ANALYSIS AND RESULTS
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One of the most important aspects of managing public
debt is developing an appropriate assessment
methodology and ensuring its proper application in
national practice. Although international standards set
certain thresholds for a country's internal and external
debt, each state must make decisions regarding these
thresholds based on its own level of economic
development and a number of related factors.
Nevertheless,
many
international
financial
organizations determine these limits depending on
whether the country is developed or developing and
based on the current status of its market economy,
offering corresponding methodological frameworks.
International studies show that there is currently no
single, unified approach for defining the minimum
acceptable levels or threshold values of external public
debt relative to GDP for developed and developing
countries. Most international financial institutions or
major credit rating agencies provide varying
interpretations of what constitutes a minimum or safe
level of external debt. In our view, among these, the
recommendations outlined in the international
standard ISSAI 5411 (The International Organization of
Supreme Audit Institutions) regarding minimum
thresholds for developing countries over the past 10
–
15
years provide more detailed and comprehensive
guidance compared to other indicators (see Table 1).
Each of these indicators not only assesses the financial
capabilities of the state, but also prescribes the
introduction of appropriate changes or additions to
public debt management strategies in cases where
established thresholds are exceeded.
Table 1
Minimum Recommended Levels of Public Debt Indicators According to the ISSAI 5411 International Standard
№
Indicators
Debt write-off, %
Debt write-off, %
1
Debt balance/income
28-63
25-35
2
Current
value
of
debt/income
88-127
200-300
3
Interest/income
4,6-6,8
7-10
4
Debt/GDP
20-25
25-30
5
Debt/income
92-167
90-150
It should be noted that individual countries use various
methods to determine debt sustainability and
establish threshold limits at both the national and
regional levels. Some of the methodologies employed
are regulated by specific national mega-regulatory
bodies and are recommended by institutional
organizations. While earlier we discussed the
recommendations provided by the International
Monetary Fund (IMF), it is worth noting that the World
Bank has also offered specific guidelines on public debt
management.
What distinguishes this methodology from others is its
ability not only to ensure debt sustainability but also to
forecast the optimal level and structure of debt in the
future. According to this methodology, the debt level
criteria or Debt Sustainability Framework (DSF)
indicators must be constantly monitored and validated
by relevant state bodies. This indicates that these
indicators have a dynamic nature, and it is difficult to
define them within a single strict threshold.
According to the IMF’s report on the economic outlook
of countries, the public debt of the Republic of
Uzbekistan is currently assessed at a “moderate” level.
In 2017, Uzbekistan’s external debt amounted to USD
7.5 billion, which accounted for 18.7% of GDP. However,
over the next five years, this figure showed a more than
threefold increase, reaching USD 23.6 billion, or 38% of
GDP, by the end of 2021 (Figure 1).
In particular, the ratio of public debt to GDP decreased
from 38.0% at the beginning of 2022 to 36.4% as of
January 1, 2023. Although public debt increased by USD
2.9 billion during 2022, the ratio declined because GDP
in USD terms grew rapidly
—
by USD 11.1 billion. In
recent years, the measures taken to maintain public
debt at a moderate level and ensure effective
management are showing positive results.
Starting from 2020, Uzbekistan introduced a legal
framework to limit the volume of newly attracted
external public debt. For instance, according to the Law
of the Republic of Uzbekistan “On the State Budget of
the Republic of Uzbekistan for 2020,” the maximum
volume of new external debt agreements signed on
behalf of the Republic of Uzbekistan or under its
guarantee was set at USD 5.5 billion.
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Figure 1. Information on the Volume of External Public Debt and Government Securities
As of the end of 2020, the volume of newly signed
government external debt agreements amounted to
5.35 billion US dollars. Starting from 2021, the legal
regulation of the safe level of government debt, as well
as the limits on new government domestic and
external debt agreements, was introduced. The
recommendations related to the minimum and
maximum limits of debt to GDP ratio or debt
sustainability framework proposed by the World Bank
are presented in the following table (Table 2).
Another advantage of the methodology recommended
by the World Bank is the differentiation of these
threshold values according to the economic
development levels of individual countries. In turn, the
existing methodology is regularly reviewed based on the
economic development trends of countries. At the same
time, a rapid increase in government debt beyond the
country’s economic development and financial capacity
can lead the country to the brink of a crisis, reducing the
ability of relevant government bodies to resolve
problems related to debt burden. Since 2011, the
methodology introduced by the World Bank for
calculating debt sustainability takes into account the
following factors:
•
Budget risk;
•
Composition of government debt;
•
Characteristics of the country's economic
development and capacity, among others.
Table 2
Threshold Levels of Government Debt
Range of indicators
Current value of public
external debt, in percent
Debt service costs, in
percent
Current value of total
public debt, in percent
GDP
Export
GDP
Export
GDP
Low
30
140
10
14
35
Medium
40
180
15
18
55
High
50
240
21
23
70
Since 2013, the World Bank and the IMF have revised
the criteria used to assess public debt for certain
groups of countries, particularly regarding its relation
to GDP, as follows:
•
For developing countries
—
50 percent of GDP;
•
For developed countries
—
60 percent of GDP.
The cost of servicing public debt is set at 10 percent of
GDP for developing countries and 15 percent for
developed countries. By 2018, the World Bank and IMF
made several adjustments to their recommended
methodologies for debt sustainability limits, including:
the use of aggregated (generalized) indicators based on
a set of factors that directly influence changes in debt
burden; detailed analysis of the socio-economic
development of countries; and baseline forecasts of
public debt, among others.
CONCLUSION
In the development of a country’s economy, the
7.5
9.9
15.7
21.1
23.6
25.9
29.6
18.7
28.3
29.7
39.1
38.2
36.4
38.4
0.05
0.6
1.55
10.74
32.24
12.55
24.11
0
500
1000
1500
0
10
20
30
40
50
2017 y 2018 y 2019 y 2020 y 2021 y 2022 y 2023 y
State external debt, billion dollars
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formation of financial resources through domestic
debt sources or revenues and their effective utilization
are of great importance. However, the growing
demand for additional capital creates a need to attract
financial resources from international capital markets.
It is crucial to establish adequate control mechanisms
for the use of these funds to ensure the efficiency of
each unit of attracted capital. In recent years, the Head
of our State has placed special emphasis on the
effective use of externally attracted debt funds and on
developing social infrastructure through these
resources.
According to the International Monetary Fund,
Uzbekistan’s economy grew by 6.4% in 2024. This
growth is mainly driven by increased domestic
demand, rising real incomes, and investments in
infrastructure projects. The IMF forecasts GDP growth
at 5.9% for 2025, supported by domestic demand and
continued investments. Although the levels of public
and external debt are increasing, this growth remains
under control and is positively evaluated by
international rating agencies. The rise in external debt
and government securities reflects the s
tate’s
investment in infrastructure as well as social and
economic projects.
Analysis results show that over the past seven years,
the amount of debt attracted by the state has doubled.
Moreover,
alongside
economic
reproduction
processes, the volume of GDP has also grown
significantly. For instance, GDP was 317.4 trillion
soums in 2017 and has increased more than 3.8 times,
reaching 1,204.1 trillion soums by the end of 2024.
When evaluated according to the debt sustainability
thresholds proposed by the IMF and the World Bank,
the growth of external debt is 0.7 percentage points
below the threshold. Additionally, in terms of risk level,
it is approaching the range between the minimum and
medium thresholds.
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